Germany Strengthens Fight Against Money Laundering and Terrorist Financing with Recent Reforms

Berlin - In recent years, Germany has taken significant steps to bolster its anti-money laundering (AML) and counter-terrorism financing (CFT) regime, with some reforms already showing promising results. However, experts warn that more needs to be done to ensure effective implementation at the operational level and adequate resourcing of authorities.

AML/CFT Challenges Remain

As the fourth-largest economy in the world and largest in the EU, Germany faces substantial risks from money laundering and terrorist financing due to its high volume of international transactions and connections. Authorities have demonstrated a strong understanding of these threats and collaborate constructively with foreign counterparts. Despite progress, challenges remain, particularly in terms of coordination between Germany’s 16 states (Länder) and different supervisory and law enforcement agencies.

Enhancing Coordination and Consistency

Enhancing cooperation and consistency among these authorities is crucial to combatting illicit financial flows effectively. Germany has made significant strides in asset confiscation, introducing non-conviction based laws that have resulted in the seizure of substantial criminal proceeds. The country’s transition to an administrative Financial Intelligence Unit (FIU) model in 2017 has also improved the collection and use of financial intelligence.

Prioritizing Implementation and Resource Allocation

However, more needs to be done to prioritize the implementation of these reforms at the operational level and enhance the analysis, dissemination, and utilization of financial intelligence. Authorities must also take a more proactive approach to investigating and prosecuting money laundering activities, aligned with Germany’s risk profile.

Combating Terrorist Financing

Germany has demonstrated a strong track record in combating terrorist financing, investigating, prosecuting, and disrupting financing activity as part of a holistic anti-terrorism strategy. However, the country could be more effective in using targeted financial sanctions as a preventive measure to freeze terrorist assets.

Regulatory Framework and Resourcing

The existing framework for regulating and supervising the financial and non-financial sectors is comprehensive, but authorities must prioritize resourcing over 300 supervisors and ensure a consistent risk-based approach is taken. The introduction of a Transparency Register has been positive, but adequate resourcing is necessary when it transitions to a full register in 2022.

Sustained Prioritization and Resourcing

As Germany continues to refine its AML/CFT regime, experts stress the importance of sustained prioritization and resourcing to combat money laundering and terrorist financing effectively. The country’s efforts are critical in maintaining financial stability and ensuring that Germany remains a leader in combating these threats.

Key Takeaways:

• Germany has made significant progress in strengthening its AML/CFT regime
• Challenges remain, particularly in terms of coordination between authorities
• Prioritizing implementation, resource allocation, and analysis of financial intelligence is crucial
• Germany must take a more proactive approach to investigating and prosecuting money laundering activities
• The country can improve its use of targeted financial sanctions to combat terrorist financing